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On The Nature of Neoliberal Economics

David M. Fields

Neoliberalism has been one of the most discussed topics of the 21st century. In many respects, the concept has been used as a ubiquitous catchphrase conveying a sense fundamental transformation of various dimensions of social life. It is espoused that given the intensification of integration, through the proliferation of capital mobility and the aggrandizement of transnational corporations (TNC’s), countries are forced into ‘prisoner’s dilemma’ type situations in which the capacity for progressive reform along Keynesian lines is limited, if nonexistent. The assumption is that the capacity is strained to sustain welfare-state institutions. This culturally hegemonic social construction is an ideological mask; the foregone conclusion is a self-fulfilling mythology.

In general, neoliberals contend that financial liberalization and privatization guarantee the most efficient utilization of capital by freeing up the market mechanism for long term sustainable growth. Calculated co-ordination by the World Bank, IMF and the US treasury department to promote neoliberal doctrine has, however, resulted in the majority of the world’s population being denied the human right of adequately commanding the productive resources requisite for sustaining high standards of living. Social outcomes like distributive justice, gender equity, basic access to socially acceptable housing, nutritious food, education, freedom from poverty and discrimination, and social inclusion have been far from reached.

Neoliberalism propels governments to adopt policies aimed at maintaining credibility in financial markets for the attraction and securing of short-term capital. The recipe for disaster is fiscal restraint, tight monetary policy, and the protection of high interest rates to prevent inflationary pressures from undermining the value of real return on financial assets. Macroeconomic policy is supposed to be designed in such a way that the interests of those who own financial assets (wealthy households) are prioritized over those who are forced to sell their labor power for sustenance. As a result, the trigger threat of capital fight significantly limits the space for attention to social welfare to be embedded.

Interestingly, given already present gender inequalities in labour markets and unequal power relationships within the household, neoliberalism forces women to assume greater responsibilities in cushioning families from economic insecurity. This has had the unintended consequence of pushing women into the informal sector of employment, maximizing susceptibility to egregious labor rights violations and physical abuse.

In response to the widespread social dislocation caused by neoliberal dogma, the Post-Washington consensus has initiated a new outlook under the rubric of ‘New Institutional Economics’ (NIE). NIE proposes the wider role of government to guarantee the conditions for markets to in fact work, as they supposedly should through the promotion of market-friendly civil societies and the encouraging of a democratic political culture. The Post-Washington consensus, like the Washington consensus, however, still promotes highly regressive macroeconomic policy. The only real difference is the facilitation of appropriate assessments, and the proliferation of that pathetic euphemism ‘social capital’, rather than forced upon structural adjustments, so institutions that do support liberalization and deregulation do not ensue disproportionate effects on the poor. Yet, in the final instance, this is just window washing (Fine & Lapavitsas, 2004).